Vice President Jusuf Kalla (JK) questioned the Central Bank Indonesia (BI) policy to maintain its benchmark interest rate of 7,5%. Criticism delivered in front of Bank Indonesia Governor Agus Martowardoyo. He said that its high interest rate causing high cost economy regarding banks policy to not lowering credit interet. It will be as long as central bank not lowering BI rate. This makes interest rates on deposits could not be pressed to below this number. As a result, community funds and assets are more concentrated in deposits and difficult to point the capital market.
This has led to decreasing purchasing ability of the community. The community more burdened with high interest rates when they are about to take a loan from a bank. According to Kalla, there is no reason for Indonesia to raise their interest rates because of The Fed. It is estimated that with the rise in The Fed interest rates, it was still below the amount of BI rate. With this, investors will still look at Indonesia as an interesting investment location. The Fed rising its interet rate to only around 0.25% while its benchmark interest in BI was still quite high.
“It is not possible for us to build, we always saying if the interest high then investment must always low. Why economy cost in Indonesia 90% in the banking sector and still 10% in the stock market? Not possible that people willing to buy shares while deposit interest still 10% or 9%, impossible. More people will still prefer to 8% deposit interest than buy a share with no exact revenue. But if deposit interest just 4% or 5% as in Malaysia or elsewhere, people must prefer to buy shares, it is better” said Kalla.
Jusuf Kalla ask BI as an independent agency willing to hear suggestions from various parties, including input from the government in determining the direction of monetary policies. According to him there are three flaws that caused Indonesia lost to compete with other countries. Interest rates are still high, the lack of logistics and infrastructure sectors, and a long and costly bureaucracy.
Bank Indonesia Governor stated that Indonesian economy at the moment need an improvement and strengthening of its economic structure. Then so would increase production capacity and national economy. Steps need to be taken, according to him, are strengthening domestic financing structure. It need an immediate formulated strategy mobilizing money and domestic funds as a source of financing the economy. When disturbances comes from global economy, portions of foreign short-term funds cause complexity of inflation control and exchange rates, so that it can make the economy easier to vacillate.
The second step needs to be done is to manage the real sector with improvements composition of export products. Majority of Indonesian export products are natural resources products, need to be restructured to add value worth to the processed products. “It also need to quickly strengthening the role of the industrial sector as the base to increase economic value added,” he said. The next step is to with the strengthening industrial sector, encourage market competition and a healthier marketing in various commodities, including basic foodstuffs.
According to Governor of the central bank, there are four Indonesian economy challenges ahead next year. First, the risk of slowing economy related to China slowdown, then risk inflicted because of China economic slowdown, a price of commodity trend which is still moving down, uncertain interest rates policy in the US (Fed rate), and risks the increasing amount of foreign funds getting out (capital outflow).
According to Dean of The University of Paramadina cum Economist Firmanzah deplored the attitude and government decision to openly criticize Bank Indonesia for not cutting its benchmark interest rate. This, according to him, can cause negative assumption to public. This argument could have delivered between the government, central bank, and a number of certain receptacles. For example in Forum of The Financial System Stability (FKSSK). This forum followed by the Minister of Finance, the Central Bank Governor, Chairman of the Board of Commissioners at Financial Services Authority (OJK), and the Indonesia Deposit Insurance Corporation (LPS).